Guide

Strategic planning for business growth

PESTLE analysis example

PESTLE analysis is a fundamental tool for business strategy and planning. It is a method of assessing your business' environment, and its possible impact on the performance of your company.

PESTLE is an acronym which stands for six external factors affecting your business: political, economic, sociological, technological, legal and environmental. Each of these factors can have a profound effect on your business and varying implications, for example, in terms of:

  • duration of impact - short term or long term
  • type of change - positive, negative or unknown
  • rate of impact - increasing, decreasing, unchanged or unknown
  • importance - critical, important, unimportant or unknown

Example of PESTLE analysis

The following PESTLE analysis example will clarify how the six external factors work and what type of information you should include in your analysis. The example scenario we have given below involves overseas sale of a product.

Category Political Economic Social Technological Legal Environment
Possible factors eg international trading tariffs, restrictions, visa requirements, price control, etc eg current UK economical situation, currency inflation, interest rates, taxation level, etc eg cultural norms, attitudes to product, consumer preferences, age and gender distribution, etc eg emergence of innovative technologies affecting the production, marketing or sale of product, automation of processes, etc eg legislative issues, such as consumer protection laws, health and safety laws, licensing regulations, etc; eg sustainability, waste management rules and regulations, green practices etc
Business impact eg - possible trade barriers to protect domestic suppliers eg - strength of overseas economies versus UK may affect price/profitability eg - will product be accepted overseas? eg - can intellectual property rights be protected overseas? eg - will the product comply or be allowed into the market? eg - pollution implications of transportation
Time frame unknown 6-12 months (possibly longer) 6-12 months 0-6 months 0-6 months n/a
Type of impact negative unknown unknown negative negative possibly negative
Rate of impact increasing unknown - dependent on the economy, and other countries' economies unknown unchanged unchanged unknown
Importance unknown important critical important critical unknown

 

Advantages of PESTLE analysis

By helping you to understand how external factors affect your businesses, PESTLE can help you:

  • determine their long-term effect on the performance and activities of your business
  • review any strategies you have in place
  • work out a new direction, product or plan for your business
  • identify solutions to problems
  • gain strategic advantage on competitors
  • evaluate the risks associated with markets you're interested in

PESTLE is an extended version of PEST analysis. It is often used in collaboration with other analytical business tools like the SWOT analysis and Porter's Five Forces to give a clear understanding of a situation and related internal and external factors.

Read about other types of strategic planning models.